As my husband and I geared up to buy our first house last year, I quickly realized how unprepared I was for the journey ahead. Here’s a breakdown of the home buying process.

Prepare for Success Before You Start

Before diving in, I tried to gather as much information as possible. I explored various mortgage options, including traditional loans and FHA-backed mortgages, focusing on down payment requirements and necessary credit scores.

We ensured our credit scores exceeded 580, the minimum for the FHA program we aimed to use. To improve our debt-to-income ratio, we paid off credit card balances. Once we met the basic criteria, we scheduled a meeting with the bank and were met with disappointment.

We discovered that many banks impose their own requirements, in addition to FHA regulations. For instance, while the federal program asked for a score of 580, the bank we approached required scores of 600 and 620, which was frustrating after our efforts to improve our credit.

Additionally, underwriters expect your deposit and closing funds to be in your account for at least two months to confirm their source and your financial stability. This was tough for someone eager to proceed.

Mortgage or Home: What Comes First?

When we began engaging with real estate agents, they asked if we’d already consulted a lender. Conversely, lenders wanted to know if we had a property in mind, leaving us puzzled.

So, what’s the best approach? “Prospective homebuyers should always consult with a lender before beginning their property search,” says Peter Jennings, a seasoned lender with over 30 years of experience. This initial meeting helps you determine the best mortgage program for your situation. Mortgages can be obtained through brokers or traditional banks, and while regulations ensure uniformity, smaller banks may offer fewer options compared to larger lenders.

When you’re ready to buy, enhance your offer with a prequalification or preapproval letter. A prequalification means a loan officer verifies you meet the minimum requirements, which is common, according to Jennings. If your income and credit are strong, lenders will likely issue a prequalification letter. “In the industry, that’s known as a slam-dunk borrower,” he adds.

On the other hand, if your application is borderline due to credit or income issues, you might opt for preapproval. “The file is formally approved pending home selection,” Jennings explains. While this process takes longer, it can expedite the time from offer acceptance to closing since much of the review is already completed.

Selecting an Agent

Once you’ve confirmed your mortgage eligibility, it’s time to begin your search. Initially, my husband and I reached out to listing agents on properties we found interesting. However, we soon learned that a buyer’s agent is compensated by the seller, meaning we didn’t incur any out-of-pocket expenses.

Not realizing that buyers aren’t responsible for agent fees is common, notes Liz Murphy, an agent in Jenkintown, Pennsylvania. “Conversations progress more smoothly once buyers understand they don’t need to pay the buyer’s agent,” she explains. “The home-buying journey is daunting, and factoring in agent costs can be overwhelming.”

Real estate agents simplify the process by uncovering properties not listed online and guiding buyers through legalities. When our purchasing experience faced unexpected challenges, like title issues, our agent clarified the situation and advised us on our next steps.

Emotional support is another critical aspect of an agent’s role, Murphy says. “You want someone who can manage the emotional rollercoaster alongside you.”

Submitting an Offer

After identifying a property you love, your agent will help you craft an offer formalized in the purchase agreement, a legally binding contract with the seller.

Consider how assertive you want to be during negotiations and the competitiveness of the market, as sellers can entertain other offers until yours is accepted. To save cash, you might ask the seller to assist with closing costs, which can vary from 3% to 9% of the sale price based on the mortgage type and down payment.

Decide if your offer should depend on the home passing inspection, and specify the inspection types. A typical home inspection checks for property flaws, while additional options like pest inspections and radon testing can also be included.

I braced for a lengthy negotiation process, but fortunately, our experience was brief. We made an offer, the seller countered, and our agent encouraged us to present our “best and final” offer, which the seller accepted.

Meanwhile, at the Mortgage Office

Now begins the waiting game. Generally, it takes about 35 days from offer acceptance to closing, though it may extend, according to Neena Vlamis, president of A&N Mortgage Services in Chicago. This period can feel frustrating, but many processes unfold behind the scenes.

Once your offer is accepted, your application enters the Attorney Review Period, where buyers conduct due diligence through inspections and request repairs or closing cost credits. “This is when you ensure the property meets your expectations,” Vlamis explains.

Afterward, it’s time to let the mortgage agent handle the details. “Validation is the primary process taking place during this interval,” Vlamis states. “It’s crucial.” As your application undergoes review, lenders verify all provided documents, including tax returns and pay stubs, for accuracy.

Given the strict regulations in the mortgage industry, banks take extensive steps to ensure the correctness of the buyer's information. They verify tax transcripts with the IRS and confirm employment details before moving the application to underwriting, where everything is double-checked.

This is also when the lender appraises the home to confirm its value aligns with or exceeds the sales price. If you’re utilizing an FHA mortgage, this appraisal must be conducted by an FHA-certified appraiser.

Throughout this period, you may find yourself with more money than usual, but it’s vital to avoid any financial changes during your application's review. Credit and employment will be reconfirmed right before the financial commitment, and any significant changes may delay the process or jeopardize your approval. “Don’t switch banks, make large purchases, or change jobs,” Vlamis warns. Such actions could affect your debt-to-income ratio, which lenders assess for timely payment likelihood. (During this time, my husband and I focused on essentials like bills and groceries.)

Preparing for Closing

Once the bank approves everything, buyers receive a financial commitment letter, indicating that financing is clear. “That’s the green light for everyone to start packing,” Vlamis says.

However, the waiting often continues, with about a week between the financial commitment and closing. “This period allows for the preparation of your closing package, final walk-through, and organization of funds for closing costs, along with deed preparation,” Vlamis adds.

When closing day arrives, you can finally relax. You’ll sign a mountain of paperwork, exchange checks and keys, and step into your new life as a homeowner.